Month: April 2011

              The True Finns suprised the complacent EU establishment with their strong showing in the election. They immediately had to offer interviews to assure everyone they are “not extremists”, anticipating a welter of vituperative commentary from those who dislike Euro scepticism.

            I do  not support their whole programme – nor am I a Finn. I do support their clearly stated view that there should no bail outs in the Eurozone. Those forming a government in Finland should listen carefully to them, and the rest of the EU would also be wise to think again.

              Doubtless much effort will go into ensuring Finland does not end up placing a veto on any Portuguese bail out. It would never do for an electorate in Europe to express a view and for that view to then derail the carefully crafted train journey to European Union. After all, the True Finns are a minority within a small country. How dare they assert that the EU has got this debt and deficit issue wrong.

             The trouble with that approach is that many people throughout western Europe disagree with the current EU debt and deficit strategy. Many share the True Finn view that lending  more money to countries that cannot afford their current levels of debt is not a winning idea. Others take the view that Germany and the richer states have to be more generous. For them EU solidarity requires the rich to subsidise the poorer on a larger scale, as happens in unitary states between regions of differing income levels.

            The markets are betting on Greece failing to make all the payments on its debt. The EU strategy of locking problem countries into large EU/IMF loans sentences them to years of poor performance in ways which will make local electorates restless. The EU policy is unlikely to produce faster growth or an early end to the rolling debt crisis. We should expect more “rogue” political results as pressures build up against the present policy on both sides of the argument.

               It is conventional wisdom in all political parties to say that the cuts should be concentrated on the administrative overhead. Front line staff should be spared the cuts.  I have said this myself. No-one wants to be hounded as a  nurse sacker or a doctor reducer or a teacher cutter. Save our schools and hospitals is part of every UK politician’s mantra.

             We need ,however, to think a little more carefully before assuming that all overhead and back up is bad. After all, there has been a long fashion to increase the amount of clerical and support work done for the police by civilian employees, so the police themselves can spend  more time out of the office on duty, tackling criminals. Having the right number of specialist administrators, case workers and the like can make for more efficient policing.

          In the NHS we need good medically trained nurses and cotors. We also need efficient receptionists, computer specialists to ensure the record systems work, procurement experts so the right medical supplies are available, and good administrators to keep a check on everything from patient records through to supplies of medicine.  If we ask nurses and doctors to do too much of this work themselves we may have a less efficient and more expensive service.

          The truth about cutting public spending is this. When it comes to core services like schools and hospitals which the public generally respects and wants, the only worthwhile thing to do is to make it more efficient. Both services will require more money over the years ahead, just as they have enjoyed throughout my lifetime. The sums will only be acceptable to taxpayers if we make the services more efficient whilst keeping or raising quality at the same time. Efficiency and quality go together if you introduce modern management approaches. Getting things right first time both raises quality and cuts costs, for example.

             Anyone trying to achieve this should not be prejudge whether they need an extra front line employee or an extra or better adminsitrative support employee. Careful analysis of each situation should tell the managers whether they need more back up staff to free specialist time for specialist functions, or less back up because systems have become too bureaucratic and complex. Tomorrow I will look at other services where cuts are possible.

        During the last election I was careful to explain the poor state of the nation’s finances, and to say when challenged to back some new local spending project that it would be very unlikely to take place whoever won, because the financial position was so dire.

        I have to confess I was wrong about how much spending a future government would undertake.           On my journey to my London office today I passed several substantial road works, with contractors paving over parts of the highway, resurfacing and painting blue cycle ways on  the Embankment. Large numbers of new granite kerbs are being introduced, extra pieces of pavement fitted and new centre reservations and crossings introduced. We read about the increases in the aid and EU expenditures as well.

          In the most infuriating category  I read about the considerable number of new jobs still being created by certain local Councils. My office doormat still receives  glossy brochures and consultation documents from various parts of  the public sector.  It is perplexing to read about possible job losses of front line public sector employees like  nurses and police, when we see around us evidence of nice to have or undesirable expenditures at a time of  restraint.

          I would welcome more examples of needless or less essential spending from bloggers to get a better picture from around the country of what are the public sector’s priorities with the money it does have.

               In 1997 the UK had the best private sector pensions schemes of any European country. We led the world in saving and providing for retirement out of funds that employers and employees put to one side for old age.

              Labour’s tax attack started the rot. Funds that were solvent, with plenty of assets to pay future pensions, suddenly had to find £5 billion a year for the Inland Revenue. Shortly after we had the Dot Com crash. We were into the decade of disaster. The Credit Crunch crash snuffed out hopes of a revival from investment gains a decade later.

               The latest figures show that only 21% of the surviving pension funds are still open for new members to join. A fifth of funds are now closed to new contributions and new years of provision for exisiting members. Last year saw high levels of closure of funds to exisiting members. No-one now seems to think the final salary pension scheme can be rescued for future generations in the private sector. Attention has turned to creating equality of disappointment by worsening the terms of public sector schemes to protect the taxpayer from their future costs.

              Why have pension funds become unaffordable? Can anything be done  to restore them?

             Today there is a unique combination of circumstances that conspire against new schemes, or even maintaining existing schemes. It is not just the tax, though the tax rises started the decline. Were government to announce the restoration of full tax privileges there would be no rush to re-establish full final salary schemes. These schemes also have to contend with inflation, which makes final salary payments in the future much dearer. They face rising costs from the good fact that on average people are living much longer. They also have had a poor experience over the last decade from investment. Shares have had a bad ten years in the UK, US and Euroland.

             It is now fashionable to say pension funds should invest heavily in government bonds. These are said to be matching assets for a pension fund. Fixed income bonds do not of course go up in line with wage and pension increases, nor do they suddenly pay more as people live longer, so it is not strictly accurate to say they match the demands of a pension fund. Worse still, at current levels of income on these bonds pension funds get a poor return. The income on these bonds is very influenced by the low official interest rates, and by the heavy buying programme from the Bank of England designed to keep prices up and bond interest rates down. A company needs huge sums to buy enough income when rates are 3-4%.

                 It is no wonder that recently Unilever and Sheffield University have decided to give up or reduce the range of   their final salary schemes, like many other employers. There is no quick fix. With a deficit the size of the current one no governemnt will rush to restore the tax breaks. Even if they did poor past investment returns and low bond yields make a pension fund risky for employers.

           I do not agree with all the long breaks we have from Parliament. The changes to the situation in LIbya and the new data about the Uk economy would be useful items to discuss, to ask the government for its latest thoughts.

           I do not agree, however, that Parliament needs to meet to have a new vote on the Libyan situation. The government presumably knows that it has to keep to the terms of the UN Resolution which in turn were the terms of the UK Parliamentary motion. They may wish to get rid of the dictator, but the UN has not charged them with that duty and they would not be entitled to endanger civilian lives to do so.

         If the leading western powers now wish to change their mission from protecting civilians to siding with the rebels and ousting the Head of state, they need first to return to the UN. If they wish to arm the rebels so they can fight more effectively, they will need UN permission to lift part of the arms ban on Libya. If they wish to make regime change the purpose, they need to amend the resolution.

           The reason many other NATO countries will not supply air to ground attack aircraft is they are worried about the legality and dangers of using such weapons.  Successful destruction of Libyan government tanks in open ground en route to shell civilians is within the spirit of the Resolution. Armed intervention against one side within urban areas where civilians may get killed does not appear to be within the terms of the Resolution.

            If France and the Uk want to make regime change rather than the defence of civlians from the more grotesque attacks the purpose, they do need UN sanction. Then the Uk Parliament should meet again to debate and vote on the change mission.

               I hear debate about the dangers of stalemate on the ground between government and rebel forces. That is a Libyan matter which is not covered by the UN. NATO governments have permission to run a No fly zone. They have established one, and have prevented the Libyan regime bombing its own civilians. All the time that remains the aim Parliament can be a no talk zone. Any mission creep requires UN and Parliamentary approval.

              The last few days have shown us that the Uk economy is generating a good number of private sector jobs. They also reveal that most of these go to a growing workforce, and do not go to those on unemployment benefit. It shows that the welfare reforms and the help with skills and training need to go further and faster to make an impact.

             Inflation at 5.3%  (RPI) is still squeezing real  incomes and living standards hard. It is not surprising that recent shop sales figures are poor. Many people are finding it a struggle to pay for the petrol, the heating and the food after big price increases have gone through. The UK, China and Brazil all have similar inflation rates  – 5.3% (RPI), 5.4% and  6.3% respectively.  The response of the authorities is very different. The UK has an official interest rate of 0.5%, China 6.3% and Brazil 11.75%. In the faster growing countries they want a higher savings rate and fear the impact of rising prices on the public, so they are taking action to curb inflation.

 Meanwhile the UK’s gross contribution to the EU, the amount we have to pay in tax or borrow, has shot up to £19.7 billion last year. Many of us would like to start the public spending cuts with that item.

           On the other side of the world China announced that her foreign exchange reserves now exceed $3 trillion. Such has been her success at making and exporting, at building up a big balance of payments surplus. The good news is that China may now let her currency rise a bit more a bit faster, which will help manufacturers in the over borrowed large importers like the US and Uk to make more at home and export more to China. UK exports of goods are now more to the non EU than the EU, on top of the majority of our trade in services being outside the EU as it has been  for many years.

              The European Central Bank revealed that it is now the proud owner of Euro 77 billion of bonds. It has been active in buying up sovereign debt in the distressed parts of the Euro area to try to help out. With its assistance to Euro area banks as well, it is now highly leveraged with a portfolio of assets that reflect the realities of the current Euro area. It is strengthening its share capital, but from a low base. The new rules on capital and risk that apply to commercial banks do not of course apply to Central banks.

             It is taking a long time to sort out the huge imbalances around the world. China needs to import more and save less. The US, UK, and the weaker parts of Euroland need to export more and borrow less. It is taking a long time to get these countries into a safer relationship one with another.

                    Today the Prime Minister takes time out from his efforts to lead NATO’s response to Libya and the UN to talk to us about immigration.

                    His general theme will be popular with many. He wants good immigration, not mass immigration. The question is, are Ministers now delivering this?

                     Most people agree our universities should be able to obtain visa for students coming here to study. Most also agree bogus Colleges set up to get people round the other immigration rules should be stopped.

                      Most agree that people with special skills we need should be granted visas and work permits. Many also agree that we need to find a way of getting more people already living here legally back to work or into work.

                       Contributors to this site have expressed many concerns about the position in the Information technology industry and the government’s approach to contractors and shorter term permits.

                       It would be useful on a day when the PM himself sets out a more controlled approach to debate whether the new  approach is working. Are the rules sensible? Do they achieve the desired aim?

                     One of the problems with this whole policy area is the fact that Labour gave away the UK’s opt out from the common borders policy within the EU. The Uk government can today only settle an immigration policy for people coming from outside the EU. Migration from within the EU is determined by the common policy and by the success of all EU members at controlling their system.

                The UN resolution that the UK government helped secure charges UN countries to impose a No fly zone on Libyan government forces so they cannot harm their citizens from the air. It has also been interpreted as allowing UN aircraft to take action against tanks and other offensive weaponry of the Libyan government if the UN forces believe those items are going to be used to harm civilians.  The UN forces, now led by France and the UK, have been doing these functions well.

           There is,however, a growing feeling by commentators that success for the French and British forces would take the form of regime change. The ultimate guarantee for the security of civilians in Libya would, some feel, only be secured if the dictator were removed. This is not what the UN agreed to. It also requires offering more help to the rebel forces to secure victory or to force the dictator out.

           In the early  days NATO struggled with the question would they take military action against rebel forces if they appeared to be advancing and running the risk of killing civilians. NATO did not want to say they would, but they recognised that the UN resolution did not say they are to intervene on the side of the rebels to promote their cause.

          Today the western powers remind us there are diplomatic actions they need to take to complement the military. What the public want to know is how long we are committed to our current range of actions, and when other countries will play a fuller part in policing the No fly zone. A No fly zone on its own was never guaranteed to bring the regime down, nor was that the UN agreed plan. If we are in for a longer operation, policing the skies above a war torn country beneath, it is high time there was proper burden sharing with other NATO nations. One of the reasons I did not vote for the intervention was the difficulty in seeing how this open ended commitment would work, and my feeling that countries nearer to Libya were better placed to do whatever needed doing from outside.

               I do not think we should seek to widen the mission to involve western countries in deciding the military and  political outcome on the ground as Libya struggles with its future. Going too far in helping the rebels means the UN then becomes involved in the conflict which is killing  people on the ground, and leads to the west being involved in any future political settlement.

                    I wish to examine the curious case of the possible resignation of Mr Norman  Lamb. Many people will not have known until the last couple of days the importance of Mr Lamb. He is a trusted adviser to the Deputy Prime Minister. He is a Lib Dem NHS expert, who has said that the NHS policies need changing.

                    Mr Lamb we are told has been in continuous discussion with Mr Clegg about the NHS and the government’s proposed reforms since May 2010. In that case, Mr Lamb must have been actively involved in Mr Clegg’s participation in drafting the crucial July 2010 White Paper setting out the need for and nature of the very wide ranging NHS reforms.

                 Mr Clegg was one of three signatories of the Preface on the title page of the White Paper, “Equity and Excellence: Liberating the NHS”, with Mr Cameron and Mr Lansley.  The one page Preface said the following:

                 “We will make the NHS more accountable to patients. We will free staff from excessive top down control…

                 “We will empower health professionals. Doctors and nurses must be able to use their professional judgement about what is right for patients. We will suppport this by giving front line staff more control.

                  “Of course our massive deficit and growing debt mean there are some difficult decisions to make. The NHS is not immune from these challenges. But far from being reason to abandon reform, it demands that we accelerate it…”

                  This seems to be crystal clear. Mr Clegg with the help of Mr Lamb signed up to a radical programme of health reform. There were no ifs and buts, no minority report, not even  some precautionary spin against the details.  Inside the document they co-authored it  said all PCTs would be abolished, “Money will follow the patient”, “providers will be paid according to their performance”. The document pledged £20 billion of efficiency savings, and a reduction in NHS management costs by a dramatic 45% in four years. “We will radically delayer and simplify the number of NHS bodies”.  The NHS providers of health care were to be converted into social enterprises, freed to compete. The private sector was also to be invited to compete to provide better health care. There were to be maximum prices, but no restriction on price competition beyond that. Monitor was to have a duty to promote competition, to ensure better quality and value for money for the NHS. The approach of providing good quality care free at the point of use was preserved but much else was to change to deliver it in a patient friendly way.

                    Many people now say they did not understand the nature of the NHS reforms, or how wide ranging they were. Many claim not to have read the Conservative Manifesto which had in it the main outlines, or the Lib Dem one which also covered some of this ground. It is strange however that those most concerned about the NHS today claim they were in ignorance of the scope of  the changes. Why  did they not  bother to read the seminal consultation document, this White Paper, issued ten months ago? Surely when this was launched with considerable publicity it was the time to catch up and make an effort to understand the plan.  Why didn’t they  have the row then before the legislation passed the Commons easily? Where were they when the Bill made swift passage?

                    Mr Lamb must have read the White Paper and given his views before and afterwards. Mr Clegg was presumably broadly happy with the document, and in his interview yesterday still seems to be happy with the main themes within it.

                      Mr Lamb needs to be careful. He is in danger of being used by the enemies of the government and the enemies of Health reform at a sensitive time for the government he supports. If he makes Mr Clegg flip flop on his robust support for the White Paper he weakens his party as well as the government. It just leads people to ask why did Lib Dems sign up for these reforms in 2010, only to seek to overturn them in 2011 at the first sign of concerted Labour and Union opposition?  May-July 2010 was the time to show political caution, the time to cause trouble on these proposals. For a signatory to the White Paper 2011 is the time to show some steel and determination to put through the vision they signed up to ten months ago.

           Listening to Mr Clegg this morning, I was struck by the central paradox. He said the most important thing the government was doing was a short term fix to cut the deficit. He rightly argued that getting on top of the deficit was essential for economic growth and stability in the future.  At the same time he wanted to stress that the government has just restored the earnings link for pensioners, and introduced more spending in schools for certain pupils through the enhanced pupil premia. Good news is higher spending, yet if you are serious about getting the deficit down you need to spend less.

           In an age of  deficit reduction politicians have to find things other than higher public spending which please voters. We need a culture where giving voters greater freedoms is a good in itself, and where we talk about the results of public spending rather than the quantities of it. Our political language does not seem yet to have accommodated the good news of doing more for less. Cutting bureaucracy by removing requirements is a way to get people on side and cut the deficit at the same time.